The ongoing uncertainty regarding the Greek debt crisis continues to dominate the markets. Over the weekend, the latest talks between the Greek government and its creditors collapsed causing high volatility and nervous trading across the European equity markets. The Athens Stock Exchange retreated sharply this morning and the Greek sovereign debt prices plunged as investors remain highly cautious regarding the current economic conditions and prospects.
In Europe, the CAC, DAX, IBEX and London equity benchmark indices fell sharply between 0.9% and 1.85%. The euro initially breached 1.12 in early trade this morning and tested a low at 1.1189 but has slightly recovered to hold around 1.1250 against the US dollar. At the moment of writing, the Athens Stock Exchange has retreated over 4.8% mainly dragged lower by the weak banking stocks.
On the macroeconomic front, we received fairly disappointing US economic data which added further pressure to the US equity indices. Industrial production fell unexpectedly 0.2% in May versus analysts’ expectations of a 0.2% rise, while the Empire manufacturing declined to -1.98 in June compared to 3.09 in May, missing analysts’ estimates of 6.0. However, the USD index continued its strong upside rally breaking above 95.0 against a basket of currencies.
The Greek government needs to secure EUR 7.2 bln in bailout aid in order to avoid a possible default by the end of the month. The next looming deadline is 30th June when Greece also needs to pay back EUR 1.5 bln to the IMF. The current conditions look very fragile as time runs against Greece, with just two weeks left.